Editorial: Fiscal burden of disaster has to be shared

An aerial view of emergency services working at the ruined CTV building in central Christchurch. Photo / Sarah Ivey

Opinion

The day after the shock, the country started to count the cost. As the earthquake's toll of dead and injured began to reveal itself it was perhaps too soon to start counting less important losses, but the visible scale of damage from Tuesday's shake has brought some fearful initial assessments.

Total insurance losses have been estimated at $12 billion by JPMorgan Securities. By comparison, the September quake has generated up to $3.5 billion of claims. The Earthquake Commission has just $4 billion in reserves after the first quake and its aftershocks which have cost it $1.5 billion.

Private insurers are going to face hefty payouts but Finance Minister Bill English conceded that not all costs will be covered. The disaster will present an additional burden to the Budget, not only in repairs to roads and other infrastructure but in its impact on economic activity. JPMorgan estimates the September earthquake took 0.2 percentage points off GDP growth in the third quarter last year but the production likely to be lost or reduced now is much greater.

The economy may be found to have slipped back into recession when the growth figure for last year's final quarter is reported shortly. If Tuesday's quake reduces national output for a third successive quarter, it would represent a severe setback to the slow recovery of the past two years.

Ultimately, of course, reconstruction in Christchurch will generate its own economic activity but in the meantime business and employment in the country's second-largest city has been largely suspended. The visible state of its central business district and the unknown state of many of its structures after the latest shake suggest it could be some time returning to normal.

And lurking in the background is a larger question over Christchurch's recovery. The stirring confidence of the Prime Minister on the subject yesterday was not echoed by all of its traumatised citizens. They have been though six months of seismic shocks and there seems no end to them. One resident told a radio station yesterday she did not want to rebuild, she wanted to live somewhere else. She may not be alone.

Geologists say it is normal for a quake of September's scale to generate thousands of aftershocks, and that one of them may be only a magnitude lower than the original, as Tuesday's was. Christchurch was merely unlucky, it seems, that its major aftershock was so close to the surface that its consequences were worse than the original. But what are the chances it could happen again?

Already questions arise about the city's ability to host Rugby World Cup teams and matches in September and October. Two of its hotels have been destroyed, another looked in danger of collapse yesterday. Liquefaction of the field at AMI Stadium, venue for seven matches during the Cup as well as two quarter-finals, has put it out of commission for the time being.

But Christchurch, as the Prime Minister said yesterday, is a proud place. Its parochialism, so evident when its champion rugby teams play at home, can be turned to advantage now. If it must suffer a full year of aftershocks, it will pass. A year will be up when the World Cup starts. The best that the rest of the country can do for Christchurch in the meantime is ensure that it remains a venue. The sooner the city recovers from this latest blow, the better for the whole country.

This is a national disaster and the country will share the cost. The budgetary burden can be met even if that requires a tax levy such as the Australian Government proposes for Queensland's flood repair. The national economy can absorb an interruption of its recovery.